A New Proposal for Collection and Generation of Information on Financial Institutions' Risk: the case of derivatives

This article aims at providing a new alternative for the collection of information on risks taken by financial institutions, which enables the calculation of risk tools usually used in risk management, such as VaR and stress tests. This approach should help risk managers, off-site supervision and academics in assessing the potential risks in financial institutions principally due to derivatives positions. The basic idea, for linear financial instruments, like the traditionally used by the management risk systems, is to reduce positions in risk factors and then mapping by vertices. For the nonlinear financial instruments all of the positions in different types of options – European, Americans, exotic, etc.– are represented as plain vanilla European options or replicated by portfolios of plain vanilla European options. The methodology was applied to Brazil, within the worst scenarios during the period from 1994 to 2004, and the paper demonstrates that the proposed approach captured the risks satisfactorily in the analyzed portfolios, including the risk existent in the strategies involving options, given an accepted error margin. This approach could be useful for regulators, risk managers; financial institutions and risk management modeling as it can be used as an input in general risk management models.

Forecasting Interest Rates: an application for Brazil

Understanding the links between long and short-term interest rates is crucial for monetary policy makers, since Central Banks decide and set short-term interest rates in order to affect indirectly long-term interest rates, which affects aggregate spending. This paper studies whether VAR/VEC models are useful in predicting long-term interest rates for Brazil. The empirical results suggest that these models are useful in building qualitative scenarios for the Term structure of interest rates, but do not provide good forecasts in terms of accuracy. Furthermore, models that assume that the future path of short-term interest rates (target interest rates) is known by forecasters do not perform better in terms of both directional and forecasting accuracy.

How Informative Are Interest Rate Survey-based Forecasts?

This paper studies the information content of survey-based predictions for the Brazilian short-term interest rate. We perform vector autoregression analysis to test for the dynamic relationship between market expectations of interest rates and spot interest rates, and a single regression forecasting approach. Empirical results suggest that surveys may be useful in assessing market expectations (contain relevant information) and in building Central Bank credibility. Within an inflation targeting framework they are crucial in order to receive timely feedback on market sentiment regarding the conduct of monetary policy

Cognitive Systems For Revenge and Forgiveness

Minimizing the costs that others impose upon oneself and upon those in whom one has a fitness stake, such as kin and allies, is a key adaptive problem for many organisms. Our ancestors regularly faced such adaptive problems (including homicide, bodily harm, theft, mate poaching, cuckoldry, reputational damage, sexual aggression, and the infliction of these costs on one\u27s offspring, mates, coalition partners, or friends). One solution to this problem is to impose retaliatory costs on an aggressor so that the aggressor and other observers will lower their estimates of the net benefits to be gained from exploiting the retaliator in the future. We posit that humans have an evolved cognitive system that implements this strategy - deterrence - which we conceptualize as a revenge system. The revenge system produces a second adaptive problem: losing downstream gains from the individual on whom retaliatory costs have been imposed. We posit, consequently, a subsidiary computational system designed to restore particular relationships after cost-imposing interactions by inhibiting revenge and motivating behaviors that signal benevolence for the harmdoer. The operation of these systems depends on estimating the risk of future exploitation by the harmdoer and the expected future value of the relationship with the harmdoer. We review empirical evidence regarding the operation of these systems, discuss the causes of cultural and individual differences in their outputs, and sketch their computational architecture

O Comportamento Cíclico do Capital dos Bancos Brasileiros

No contexto de transição regulamentar para os padrões do acordo de Basiléia II, este artigo analisa o comportamento cíclico do capital bancário brasileiro sob a regulação atual. Utilizamos um painel não-balanceado de dados dos bancos operando no Brasil entre 2003 e 2008 para estimar, através de técnicas de painel dinâmico, uma equação do capital econômico dos bancos. Nossos resultados mostram que esta variável move-se com o ciclo de negócios.Bancos, Basiléia II, Ciclos Econômicos, Capital dos Bancos

Preliminary Evidence That CD38 Moderates the Association of Neuroticism on Amygdala-Subgenual Cingulate Connectivity.

CD38 genetic variation has been associated with autism spectrum disorders and social anxiety disorder, which may result from CD38's regulation of oxytocin secretion. Converging evidence has found that the rs3796863 A-allele contributes to increased social sensitivity compared to the CC genotype. The current study examined the moderating role of CD38 genetic variants (rs3796863 and rs6449182) that have been associated with enhanced (or reduced) social sensitivity on neural activation related to neuroticism, which is commonly elevated in individuals with social anxiety and depression. Adults (n = 72) with varying levels of social anxiety and depression provided biological samples for DNA extraction, completed a measure of neuroticism, and participated in a standardized emotion processing task (affect matching) while undergoing fMRI. A significant interaction effect was found for rs3796863 x neuroticism that predicted right amygdala-subgenual anterior cingulate cortex (sgACC) functional connectivity. Simple slopes analyses showed a positive association between neuroticism and right amygdala-sgACC connectivity among rs3796863 A-allele carriers. Findings suggest that the more socially sensitive rs3796863 A-allele may partially explain the relationship between a known risk factor (i.e. neuroticism) and promising biomarker (i.e. amygdala-sgACC connectivity) in the development and maintenance of social anxiety and depression

Developing and Validating a Risk Score for Lower-Extremity Amputation in Patients Hospitalized for a Diabetic Foot Infection

Objective: Diabetic foot infection is the predominant predisposing factor to nontraumatic lower-extremity amputation (LEA), but few studies have investigated which specific risk factors are most associated with LEA. We sought to develop and validate a risk score to aid in the early identification of patients hospitalized for diabetic foot infection who are at highest risk of LEA. Research Design and Methods: Using a large, clinical research database (CareFusion), we identified patients hospitalized at 97 hospitals in the U.S. between 2003 and 2007 for culture-documented diabetic foot infection. Candidate risk factors for LEA included demographic data, clinical presentation, chronic diseases, and recent previous hospitalization. We fit a logistic regression model using 75% of the population and converted the model coefficients to a numeric risk score. We then validated the score using the remaining 25% of patients. Results: Among 3,018 eligible patients, 21.4% underwent an LEA. The risk factors most highly associated with LEA (P 11,000 per mm3. The model showed good discrimination (c-statistic 0.76) and excellent calibration (Hosmer-Lemeshow, P = 0.63). The risk score stratified patients into five groups, demonstrating a graded relation to LEA risk (P < 0.0001). The LEA rates (derivation and validation cohorts) were 0% for patients with a score of 0 and ~50% for those with a score of ≥21. Conclusions: Using a large, hospitalized population, we developed and validated a risk score that seems to accurately stratify the risk of LEA among patients hospitalized for a diabetic foot infection. This score may help to identify high-risk patients upon admission